Bailout path: Bond swap deal helps Greece avert default
Greece averted the immediate risk of an uncontrolled default, winning strong acceptance from its private creditors for a bond swap deal, which will ease its massive public debt and clear the way for a new international bailout.
The finance ministry said creditors had tendered 85.8% of the €177 billion in bonds regulated under Greek law. This would reach 95.7% of all privately-held Greek debt with the use of “collective action clauses” to enforce the deal on creditors who refused to take part voluntarily.
The result should clear the way for the European Union and International Monetary Fund to release a €130 billion ($172 billion) bailout package agreed with Greece last month.
Government spokesman Pantelis Kapsis said the result was a “vote of confidence” in Athens’ ability to carry out deep structural reforms to its stricken economy. “I think it’s a historic moment,” he told television station Antenna.
But Greece remains a long way from solving its daunting economic, political and social problems. Reforms demanded by the EU and IMF along with deep budget cuts have provoked serious violence in Athens and helped to send unemployment over 20% as the nation suffers its fifth year of recession.
The country also faces elections probably next month when the pro-bailout conservatives and socialists face an array of smaller parties to the left and right that reject the rescue.
Nevertheless, the bond success went down well in EU capitals as the bloc tries to protect far bigger economies with debt problems. “It’s good news, its a good success,” French finance minister Francois Baroin told RTL radio. “It’s something that allows us to stay on a voluntary basis that avoids the risk of default.”